Transcript: US considers breaking up Google

This is an audio transcript of the FT News Briefing podcast episode: ‘US considers breaking up Google’

Sonja Hutson
Good morning from the Financial Times. Today is Thursday, October 10th, and this is your FT News Briefing.

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HSBC’s new boss is getting right down to cutting costs and the Conservative party is picking its next leader. Plus, the US government has Google in its crosshairs. 

Stefania Palma
Definitely the more sort of eye-popping one remains potentially seeking structural remedies, which in plain English just means a break-up of Google. 

Sonja Hutson
I’m Sonja Hutson, and here’s the news you need to start your day.

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Some of HSBC’s highest-paid executives might be shown the door soon. Its new CEO, Georges Elhedery, plans to merge its commercial and investment banking units. It’s his first big step to cut costs and includes getting rid of a few duplicate roles in senior management. The move is designed to save about $300mn, which actually isn’t that much. It’s just 1 per cent of HSBC's total costs from last year. So the merger is likely just the start of Elhedery’s overall cost-cutting programme. HSBC profits did see a solid boost in recent years from higher interest rates. But now, as rates fall, it faces the prospect of tighter margins.

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The Conservative party leadership race in the UK was whittled down to two people yesterday. Right-wing candidates Kemi Badenoch and Robert Jenrick are currently neck and neck. Voting now heads to Tory members and the winner will be announced in a few weeks. Whoever it is, they will be inheriting a fractured party still reeling from its worst-ever election defeat in July. The party’s Lucy Fisher joins me now to get us up to speed on the finalists. Hi, Lucy. 

Lucy Fisher
Hi, Great to be with you. 

Sonja Hutson
Great to have you. So let’s start with one of the two remaining candidates, Kemi Badenoch. Can you tell me a little bit about her? 

Lucy Fisher
So she is a former business secretary. She’s staunchly on the right to the party and has expressed views that have stoked controversy. She describes herself as a net zero sceptic. She very much enjoys attacking what she calls left-wing nonsense. And she’s been outspoken in challenging views around transgender rights. Her allies say she has the most intellectual critique of where the Conservatives need to go. She published a 40-page pamphlet talking about the rise of a bureaucratic class in the UK, which she said is driving an economic slowdown. She has won support from some of the other rising stars on the Tory front bench. So she’s got a kind of interesting cabal of supporters behind her as well. 

Sonja Hutson
And she’s up against Robert Jenrick. What’s his story? 

Lucy Fisher
Well, interestingly, he was seen very much as being a centrist at the beginning of his political career. But he’s very much tacked right in this leadership contest. And in particular, he’s focused heavily on immigration. So he’s a former immigration minister and he quit Rishi Sunak’s administration, accusing Sunak of being too weak on migration. So Jenrick has been the only candidate in this race who has outright vowed to take the UK out of the European Convention on Human Rights if he comes to power. And he was one of two candidates who has called for a concrete cap on net inward legal migration to the UK. 

Sonja Hutson
So we obviously know for sure that the next leader will be from the right wing of the party. What do you think that says about the mood within the Conservative party right now and the direction that it’s heading? 

Lucy Fisher
Well, I think there’s two things to flag here. The first is that we often see parties after they face a rout in the polls, a retreat into what they feel is comfort territory. And that’s what I think we’re partly seeing here with the conservatives, the analysis that they lost because they weren’t rightwing enough. I think one thing that’s specific to this most recent election, however, is the rise of Nigel Farage’s Reform UK party, which outflanked the Conservatives on the right on a number of issues, including immigration. So I think that many in the Parliamentary party think that it needs to do more to shore itself up against the threat from Reform UK going forward. 

Sonja Hutson
Lucy Fisher is the FT’s Whitehall editor and the host of our Political Fix podcast. Thanks, Lucy. 

Lucy Fisher
Thanks for having me. 

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Sonja Hutson
Germany might be looking at its first two-year recession in decades. The government downgraded the country’s growth forecast yesterday. So now the economy is expected to shrink by 0.2 per cent. Before, it was supposed to grow a bit. The eurozone’s largest economy is struggling with some big structural issues like a dire skills gap and years of under-investment in infrastructure. Plus, there’s just a lot of bureaucratic red tape slowing businesses down. But there is a light at the end of the tunnel. The country’s economy minister expects growth to pick back up next year once lower inflation and interest rate cuts kick in.

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The US government is considering asking a judge to break up Google. The court ruled in August that the tech giant had an illegal monopoly on search. The next step then was for federal prosecutors to lay out options for a judge to address the issue. And they filed a court document late on Tuesday outlining those so-called potential remedies. But would any of those options be able to end Google’s stranglehold on search? Here to answer that question is the FT’s Stefania Palma. Hi, Stefania. 

Stefania Palma
Hi. 

Sonja Hutson
So what sort of options is the DoJ outlining here? 

Stefania Palma
So I think it was quite clear that the DoJ proposed a very, very broad set of potential remedies with this filing. Definitely the more sort of eye-popping one remains potentially seeking structural remedies, which in plain English just means a break-up of Google. We still don’t know exactly what form that would take. But the other end of the spectrum in terms of sort of ambition when it comes to these potential remedies or say, potentially banning the kinds of contracts that are actually at the heart of this case. These are anti-competitive deals that Google has struck with a whole set of companies over the years for tens of billions of dollars in order to ensure that Google search remains the built-in default when, for example, you open up your laptop or you open up your phone. 

Sonja Hutson
So what happens next in the process here? 

Stefania Palma
I think it’s important to remind everyone that this is kind of the first step in the second phase of this long and twisting trial. So there’s . . . 

Sonja Hutson
You know it’s a long process when you have to have different sub-phases. 

Stefania Palma
Correct. And now we’re in phase number two, and the DoJ has kicked it, sort of kicked it off in earnest with this filing, which again, is just a preliminary first proposal of all the remedies it is considering. And then the judge said that he is aiming to make a final decision by August, but that is also not the end of this. I mean, Google has already indicated very strongly that it wants to kick off an appeals process potentially all the way up to the Supreme Court that could take years. 

Sonja Hutson
So this sounds like it’s going to continue to be a very lengthy process for this case. At the end of it all, what might ultimately happen to Google’s search monopoly? 

Stefania Palma
It’s a complicated question because this really is a moment — big, big moment. However, it’s also true that this action has come, some would say, quite late in the game in the sense that Google has already built up what the judge has defined as a monopoly in search. It’s much harder to dismantle a monopoly once it’s already been created. And in addition to that, one also has to question to what degree users would actually change their behaviour. Even if, let’s say, Google gets broken up, will people really automatically switch out and not use Google’s search engine any more? At the same time, I think the DoJ would say it’s important for them to still try to take action and not necessarily leave market dominance unchecked, even if it is just to create potentially a more level playing field for future developments in big tech and to kind of create a different market structure that tries to potentially prevent more anti-competitive behaviour in the future. 

Sonja Hutson
Stefania Palma is the FT’s US legal and enforcement correspondent. Thanks, Stefania. 

Stefania Palma
Thank you. 

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Sonja Hutson
Before we go, a quick correction. In yesterday’s show, we said that Germany’s far-right party, the AfD, had recently made gains in local elections. They were actually state elections. Thanks to one of our listeners for pointing this out.

You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.